Setting up a Savings Account for Your Grandchild

Children often express the desire for many things from designer clothes to the latest electronic gadgets. While many grandparents are happy to indulge their grandchildren when they can, such gifts aren't nearly as valuable as setting up a savings account for a grandchild.

Establishing the Saving Habit

Today's kids, much like the generations that came before them, aren't likely to consider their future needs with nearly the enthusiasm that they have for their current wants. Nonetheless, teaching children to save money is a wise investment in their development as fiscally responsible people. Children who learn early on to set aside some of their funds are more likely then their non-saving peers to hold a healthy respect for money and to be knowledgeable in the wise management of their finances. Heading off with their grandparents to set up a savings account can be a memorable experience for grandchildren, especially if the grandparent stresses the importance of the day.

Teaching children to save for the things that they want, rather than spending their money mindlessly is a lesson that they will carry throughout their lives. Far too many people get themselves into trouble with credit cards and other debts simply because they have not learned to postpone purchasing until they can truly afford the things that they want. Good savers aren't likely to get themselves into financial trouble requiring credit counseling or debt consolidation help.

Things to Consider

While some children will dutifully leave funds in their savings accounts until they are grown, others may be inclined to head to the bank to withdraw money for impulse items throughout the years. Grandparents who wish to assure that their grandchildren cannot spend their savings frivolously can set up the account so that the child cannot access the money without the signature of a second party -- usually a parent, grandparent, or other adult family member. Bank officials are available to answer questions and help guide patrons toward the type of savings accounts that best meet their needs.

Ongoing Contributions

When a grandparent helps a grandchild to set up a savings account, they usually start the child out by making that first deposit. Some grandparents may wish to add to the account, either on a regular basis or occasionally, to mark special occasions such as birthdays, graduations, or other childhood milestones. In any case, grandparents should encourage their grandchildren to make their own contributions into their savings account, explaining the value of building a nestegg.

In families that give children a weekly allowance, children should be encouraged (or required) to save a portion of their pay. Many children would also welcome the opportunity to earn a bit of extra cash for both saving and spending. Grandparents who are able to do so may want to offer to pay their grandchildren to perform tasks such as working in the garden or washing the family car. Children who earn their money often have a greater appreciation for it. Once they are teenagers, all children who hold after school jobs can be expected to bank at least some of their earnings.

Talking So They Will Listen

Children, especially young ones, are not likely to find the world of finance particularly interesting or exciting. Savings plans and interest rates are not topics high on the list of favourites among the pre-teen crowd, but by taking the time to let kids know what they can achieve by becoming regular savers, grandparents can help their grandchildren to develop sound financial strategies that will serve them well throughout their lives.

Children should be encouraged to save part, but not all of their money, allowing them to enjoy some purchases that offer immediate gratification. Additionally, kids need to have goals in mind for their savings in order for them to happily make ongoing deposits into their accounts. Ideally, children will learn to view money as a tool to help them to live well, rather than viewing the accumulation of funds to be a goal in itself. For example, while kids are not apt to be excited to know that by making regularly scheduled deposits into their savings accounts they will have a certain amount saved by age eighteen, they may find it very interesting to know that they have the ability to save for a car, a university education, or even a downpayment on their first home. Working toward specific goals is a good practice, in matters of finance as well as in other areas. Teaching children that they have the power to impact their own lives is a valuable gift.